2010 (9) TMI 1095 - HC - VAT and Sales Tax

Levy of tax on additional turnover - additional turnover arrived on the basis of electricity consumption - Whether the re-assessment made by the CTO for levying tax on the additional turnover worked out on the basis of electricity consumption communicated by the officials of the Vigilance and Enforcement Wing, is valid as per the facts and the law? Held that - it cannot be said that estimation of turnover was made purely on the basis of electricity consumption only. In the case on hand, the Appellants, despite a written notice issued by the CTO, had failed to produce their Books of Accounts - the Appellants have not even offered any explanation, much less a reasonable and valid explanation, to show as to why the electricity consumption was more and there was no corresponding increase in the production. The CTO had sufficient material for coming to a conclusion as regards the consumption of electricity and he is therefore duty bound to make an estimate of the turnover on the basis of inspection material and other information available to him. The Appellants themselves failed to explain the reasons for not producing the Books of Accounts and other required information to the CTO. Under these circumstances, the Assessing Authority is authorized to finalise the assessment work by following realistic method in estimating the turnovers. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
- Whether the re-assessment made by the CTO for levying tax on the additional turnover based on electricity consumption is valid as per the facts and the law.
- Relief sought by the appellants.

Issue-wise Detailed Analysis:

1. Validity of Re-assessment Based on Electricity Consumption:

The appellants, registered dealers in Granite Stone Crushers, were initially assessed with a Gross Turnover (G.T.O) of Rs. 6,69,380 and Net Turnover (N.T.O) of Rs. 6,69,380 for the year 1994-95. The Vigilance and Enforcement Wing, along with the Mines and Geology Department, analyzed the electricity consumption records and concluded that the sales recorded were disproportionate to the production derived from electricity consumption. Consequently, the CTO re-assessed the appellants, adding an additional turnover of Rs. 37,66,636, which was considered as sales suppression.

The appellants contended that the re-assessment was based solely on electricity consumption without any concrete evidence of sales suppression. They argued that the CTO did not exercise his discretion as a quasi-judicial authority and simply followed the Vigilance Officials' findings. They cited several case laws to support their argument that electricity consumption alone cannot justify a best judgment assessment unless there is evidence of actual sales suppression.

The court examined the case laws presented by the appellants, such as M/s. General Electric Company of India Ltd. v. The Sales Tax Officer, Kanpur, and M/s. Mahashakti Oil Mills v. The Commissioner-Sales Tax, Lucknow, which emphasized that high electricity consumption alone is insufficient for rejecting account books and making a best judgment assessment.

However, the court also considered case laws supporting the re-assessment based on electricity consumption, such as M/s. Shanmugam Oil Mills v. Commissioner of Commercial Taxes of Karnataka State, where it was held that electricity consumption has a correlation to the output and can be a sound basis for fixing turnover. The court noted that the appellants failed to produce their books of accounts and other required information despite repeated requests, leaving the CTO with no option but to finalize the assessment based on available material.

The court concluded that the CTO had sufficient material to estimate the turnover based on electricity consumption and that the estimation was not arbitrary. The court held that the re-assessment was valid, as it was based on a realistic method of estimation in the absence of the appellants' cooperation.

2. Relief Sought by the Appellants:

The appellants sought relief by requesting the verification of assessment records and the grant of necessary relief. However, the court found no infirmities in the impugned orders passed by the CTO and the ADC. The court rejected the appellants' contentions, stating that the estimation of turnover based on electricity consumption was justified given the circumstances and the appellants' failure to provide the required information.

Conclusion:

The appeal was dismissed, with the court upholding the re-assessment made by the CTO based on electricity consumption. The court emphasized that the estimation was not arbitrary and had a valid basis, given the appellants' non-cooperation in providing necessary records and information. The impugned orders were found to be in accordance with the law and facts of the case.